Apple CEO Steve Jobs unveils the Power Macintosh G4 Cube during an Apple conference in New York City in 2000. (AP Photo/Richard Drew)

Photo: Richard Drew, AP

Apple CEO Steve Jobs unveils the Power Macintosh G4 Cube during an...

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In this June 7, 2010 photo, Apple CEO Steve Jobs uses the new iPhone 4, at the Apple Worldwide Developers Conference in San Francisco. Apple said Friday, July 2, it is "stunned" to find that its latest iPhone model uses a "completely wrong" formula to show how many bars of signal strength it's getting. (AP Photo/Paul Sakuma)
Ran on: 07-13-2010
Apple's Steve Jobs demos the iPhone 4 in San Francisco.
Ran on: 07-13-2010
Apple's Steve Jobs demos the iPhone 4 in San Francisco.

Photo: Paul Sakuma, AP

In this June 7, 2010 photo, Apple CEO Steve Jobs uses the new...

Image 3 of 4

In this June 7, 2010 photo, Apple CEO Steve Jobs talks about the composition and metal antennae band that surrounds the new Apple iPhone4 at the Apple Worldwide Developers Conference, in San Francisco. Apple Inc. said Friday that it was "stunned" to findthat its iPhones have for years been using a "totally wrong" formula to determine how many bars of signal strength they are getting.

Apple's public relations woes over its iPhone 4 - the latest hit came from Consumer Reports, which said it won't recommend the device - is conjuring up memories of a previously flawed product launch.

In 2000, Apple introduced the Power Mac G4 Cube, a stunning but pricey computer that was overshadowed by cracks that appeared along its top. The blemishes didn't affect the functions of the computer but were significant to Apple's aesthetic-loving customers.

While Apple dismissed the perceived cracks, saying they were not an issue and were simple "mold lines," the attention paid to it became the story that helped define the Cube, and along with its price, doomed the computer. Apple discontinued the machine one year later.

Leander Kahney, an editor of CultofMac.com and an author of several books on Apple, said the company is flirting with a similar PR disaster with the iPhone 4 and its controversial antenna.

On Monday, Consumer Reports magazine declined to recommend the iPhone 4 after it discovered a "design flaw" with its external antenna, which is built into the stainless steel frame of the phone and is prone to interference from normal handling by users. This conclusion came despite giving the iPhone 4 its highest smart phone rating.

The lack of a recommendation by Consumer Reports is significant because the magazine is one of the most trusted consumer testing organizations and its research is among the most comprehensive of any independent organization. Apple's earlier model, the iPhone 3GS, was previously Consumer Reports' highest-rated smart phone.

High stakes

"I think it's something Apple really has to respond to, and how they respond will determine the success of the product," Kahney said. "The Power Mac Cube started slowly, and the cracks became this PR snowball that doomed that machine."

The stakes are high for the company, which declined to comment for this story. The iPhone has become Apple's biggest revenue driver, accounting for about 40 percent of sales. The news comes as Apple faces increased competition from a growing list of challengers, most notably phones running Google's Android operating system.

The Consumer Reports review confirmed earlier reports that the iPhone 4, with its external antenna, was vulnerable to signal degradation when held by the bottom left-hand corner where two antennas meet.

"When your finger or hand touches a spot on the phone's lower left side - an easy thing, especially for lefties - the signal can significantly degrade enough to cause you to lose your connection altogether if you're in an area with a weak signal," wrote tester Mike Gikas. "Apple needs to come up with a permanent - and free - fix for the antenna problem before we can recommend the iPhone 4."

The story also refuted Apple's own explanation of the problem. One week after the June 24 launch of the iPhone 4, Apple said the phone suffered from a software problem that misrepresented its signal strength and exaggerated the normal signal loss that occurs when phones are held the wrong way. The company promised a software update that will correct the signal display in the coming weeks and instructed users to either hold the phone differently or buy a protective case.

Pressure to respond

Apple has declined requests to supply free bumper cases to users. At least four lawsuits have been filed against Apple alleging the company released a defective product.

Some observers believe the pressure is on Apple to respond with something more substantive than its software explanation or risk future sales of the iPhone.

"The steady drip, drip, drip will hit a tipping point where the weight of it is too much to endure and will scare away potential iPhone users," said Gene Grabowski, a public relations crisis expert with Levick Strategic Communications. "Apple will have to make some kind of grand gesture along the lines of providing a cover or some kind of fix that will satisfy buyers of the iPhone. If they don't do something, potential sales of the phone will drop."

Some analysts, however, question how much of a problem this is for Apple. Carl Howe, director of research for the Yankee Group, a technology research company, said all Apple products come with some minor glitches that gain attention.

The latest antenna problems - which Howe hasn't experienced personally - are easily solved by the purchase of a cover, something many users already do, or by a change in hand placement.

He said it's hard to tell if Apple is even feeling any drop-off in interest in the iPhone 4 because sales are still so new and demand has outstripped supply.

"This is not a showstopper or a warranty recall," Howe said. "I would be really surprised if Apple didn't sell as many as they can make because it's still in huge demand."